Music confab focuses on globalization, technology

The potential pluses and pitfalls of globalization and new digital technologies were highlighted at a music panel, “Music in the ’90s: What’s Next? Life After Consolidation,” at yesterday’s Variety/Wertheim Schroder Entertainment Business Conference.

The panel was moderated by MTV Networks CEO Tom Freston.

Panelist Al Teller served as something of an iconoclast on both issues. The MCA Music Entertainment Group chairman said that while the multinationals that control the six major diskeries are understandably keen to exploit global markets, he worried that the human element might become lost in the numbers-crunching.

Creative comes first

“The record business works on a very ‘micro’ kind of level,” Teller averred. “The focus must be first and foremost on the creative side.”

Teller’s admonition came partly in response to comments from Sony USA vice chairman Michael Schulhof, who recalled that through the early 1970s, the record industry had been run mainly by “music people” (musicians, producers and the like) as “a small business,” where the creative and business decisions were often made by the same people.

With the explosion in revenues since then — Sony’s forerunner CBS Records pulled in about $ 200 million worldwide in 1972, compared with a projected $ 4 billion this year — Schulhof said the industry “cannot afford to be run in the same way as it was when the business was much smaller.”

Panelist Eric Kronfeld, president/chief operating officer of Polygram Holding Inc., maintained that his company looks at the international picture from two angles: developing U.S. and U.K. acts into universally selling acts, and developing “local” talent in various markets to fill the resulting gaps.

Warner Music Group chairman/CEO Robert Morgado agreed, saying, “The music business by its innate nature is a global enterprise.” He added that Warner’s mandate is to be “very local at the same time that we are very international in scope.”

MiniDisc or DCC?

As for the ongoing debate over the viability of the Sony-developed MiniDisc and the Philips-developed Digital Compact Cassette, with which MCA’s parent Matsushita has also been involved, Teller classified consumer interest as a “massive yawn.”

The Sony and (Philips-owned) Polygram reps had different opinions. Schulhof, noting that the CD has taken some 10 years to reach a 40% penetration level in the U.S., predicted the MD would reach as much as 50% in the same period.

Kronfeld, saying his company doesn’t view the situation “as a war between Philips and Sony,” said that Sony was rushing the issue. “Our objection to the introduction of the MiniDisc at this time is, why damage the CD before it’s reached its maturity?”

DCC, he said, would allow the industry to continue profiting as a dual-carrier industry.

Schulhof replied that Sony expected the MD to co-exist with the CD, rather than replace it, and that the new format’s portability served as its prime reason for existence. Teller retorted, “I don’t think the consumer is anxiously looking for an optical carrier to replace the (analog) cassette,” saying that DCC wouldn’t take off until an affordable portable unit hits the streets (expected sometime later this year) and that the current wave of portable MD players aren’t so portable and don’t play smoothly when jogging, as advertised.

Morgado, whose Warner Music Group is the one major not owned at least in part by a hardware manufacturer, said his company would “be the referee” in the debate, adding that it would be several years before a consensus would be reached on which, if either, format would succeed. “Ultimately the consumer will vote with his pocketbook,” he said.

The relatively new concept of electronic home delivery of music, via digital cable radio or other methods, was looked upon with interest by the participants. Morgado called it “ultimately inevitable,” adding that Warner looks at it as a potentially valuable marketing tool.

Schulhof said that concerns in some quarters that such easy delivery would spell the end of the retailer as we know it might be unfounded, saying, “We have to understand the human behavior side better.”

Teller took up that idea, saying a possible “intermediary step” would be to transform the retailer into an electronic delivery environment, one where stores would download a signal on demand, allow consumers to sample the given songs, and then sell them the actual product.

“We would replace our factories with electronic warehouses,” Teller said, adding that the move would obviously cost a lot, “not only in time and energy, but also in money.”